Patents and Innovation Economics

Substantive law can be derived from first principles, while most procedural law cannot. Procedural law exists to support and protect substantive law. This means that substantive law is primary and procedural law is secondary. This is important to understand in debates on laws and the Constitution. An example of substantive law is the law against murder or property rights. An example of procedural law is that you are tried in criminal court by a jury of twelve peers or requiring a warrant for police to undertake a search.

Procedural laws are somewhat arbitrary and under common law are often based on historical incidents. For instance the idea of a trial by a jury of your peers comes from the Magna Carta. The Magna Carta (1215 CE) was created in reaction to King John’s tyrannical rule. The idea of being tried by your peers was in reaction to the King or his administration issuing arbitrary rulings. The ultimate goal was to obtain fair trials where substantive law is correctly applied. However, we are all aware of jury trials with unjust outcomes.

Not surprisingly modern statists (both socialists and conservatives) have purposely confused the difference between substantive and procedural law. One example of this is the idea of “procedural justice”, which in its broadest form is the idea that whether a legal proceeding is “just” is defined by whether the correct procedures were followed. Under procedural justice, if King John followed the correct procedures then his actions were just. “Criminal trials at the time took the form of ‘ordeals’ by fire or by water; supervised by the local priest. God was the judge, and he would ensure that the innocent survived — thus, suspects dunked in ponds were declared guilty if they drowned.”[1] This is the sort of nonsense that procedural justice leads to.

Libertarians have a specific strain of procedural justice, which boils down to the non-aggression principle (NAP). This concept is associated with Robert Nozick, Murray Rothbard, and Stefan Molyneux.[2] The non-aggression principle is an attempt to short cut the hard philosophical work of defining rights and laws to protect them. Here are a couple of examples of the nonsense the NAP leads to.

1) A nomad picks an apple from a tree. The orchard owner points a gun at the nomad and demands he return the apple. Who is the aggressor? I can assure you that the nomad thinks the farmer is the aggressor. The nomad does not recognize or understand the idea that you have a property right in something you grow. To him property rights are defined by the first person to acquire something. Of course, the farmer believes that the nomad is the aggressor. It is impossible to determine who is the aggressor in the case without a proper definition of property rights, something libertarians have failed to do. In fact, libertarians and Austrian Economics do not think property Rights exist, just a utilitarian legal clam to things, which they call property.

An environmentalist blows up a libertarian’s SUV. Who is the aggressor? The environmentalist argues the libertarian is the aggressor because he is putting greenhouse gases into the atmosphere and killing the planet and the environmentalist with it. The libertarian points to his car and says the environmentalist is the aggressor. Without reason and science it is impossible to decide who is the aggressor here. A proper understanding of property rights is also necessary.

The non-aggression principle at best is derived from reason that also properly defines property rights and a rational ethics. However, the NAP pushers think they can side step this hard work. Without this foundation the NAP leads to nonsense.

Substantive laws protect people’s natural rights, which are the rights that can be derived from the fact you own yourself using reason (evidence and logic). Procedural laws are rules that are designed to ensure your natural rights are protected by the government by requiring certain processes. People often confuse procedural guarantees for rights. Unfortunately, even the founders’ in the Bill of Rights made this mistake. The sixth amendment is an example of this, but not the only example.

In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense.

You do not have a natural right to a trial, that the trial be public or speedy or by a jury. You cannot create a formal logical argument that requires a speedy, public, jury, trial because you are the owner of your life and yourself. We all know that speedy trials are not necessarily more accurate or just than slow trails. The USSR held public trials. This did not mean that they were not show trials. In the United States today people are convicted of all sorts of crimes that meet the sixth amendment standards, but are not just because they are based on unjust laws. For instance, people are convicted of unconstitutional securities laws, or drug laws, or environmental laws. These trials are not just.

Confusing procedural guarantees with Natural Rights confuses the discussion and undermines our rights. A procedural guarantee in almost all cases is a government created rule that is not based in strict logic. If we call these procedural guarantees rights, then we logically open the door to the argument that “Rights” are created by governments. One procedural (and evidentiary) rule that might be based in reason and Natural Rights is the maxim “innocent until proven guilty”. However, this maxim is still not a right. A right defines a moral (and legal) claim to take action without anyone’s consent. The innocent until proven guilty maxim is not a right to take action.

The United States Constitution is mainly a document about procedural rules, not about protecting our rights. As a result, we often put too much importance on the Constitution. I have shown in my post, Property Rights: The Foundation of Freedom, that property rights/laws are much more important in protecting our rights than the Constitution.

When we examine the original Constitution (the Bill of Rights were added three years after the Constitution was ratified) we find it is composed of a preamble and seven Articles. The first three Articles are directed to setting up the legislative, executive, and judicial branches of the federal government. Article 4 is about the relationship between the States and the federal government. It is important to remember that the Constitution did not and was not intended to setup the only or even the supreme government in the United States. The Constitution setup a federal government to deal with problems that the states could not solve individually or that would cause chaos if each State government took their own different positions, for example foreign relations and war.

Article 5 is about the procedure of adding amendments to the Constitution. Article 6 is about Prior Debts, National Supremacy, and Oaths of Office. It is basically a hodgepodge of items that did not fit in the other articles. Article 7 defines the procedure for ratifying the Constitution.

The high level structure of the Constitution is about procedures not rights. The first three Articles define the structure of the federal government. This structure is modeled after the government of the Roman Republic and the English monarchy. Sorry Christians the United States Constitution is not a Christian document any more than geometry is Greek math. The Constitution is devoid of any reference to God or the creator or any other reference to religion. Article 6 does state this however “but no religiousTest shall ever be required as a Qualification to any Office or public Trust under the United States.”

Article 1 of the Constitution sets up the legislature and divides it between a Senate and a House. The Senate is made up of two people from each state picked by the state legislature. The terms of office are set out for Senators and Representatives, minimum ages, and other procedural rules. You cannot logically prove that the best government is made of three branches. Or that the legislature should be divided into two houses, or that requiring a certain age to serve is necessary. All of these are procedural rules and cannot be derived from our natural rights. Despite this, it is important to point out when government officials do not follow the Constitution, because those are the rules they are supposed to be bound by. However, not following many of the rules in the Constitution does not result in a violation of anyone’s Natural Rights. The goal of government is to protect our individual rights and all this procedural stuff is just to help ensure that. As the Declaration of Independence states:

All men are created equal, [that] they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men

There is only one right (Natural Right) mentioned in the United States Constitution and it is in Article 1, Section 8, Clause 8:

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries

There is a lot of nonsense about the Patent and Copyright clause, including that the preamble (To promote the Progress of Science and useful Arts) is limiting on this RIGHT. This is the same nonsense used against the 2nd amendment. Preambles in law are not limiting, they are merely descriptive. It makes no sense to say you have a right that is limited by some utilitarian criteria. Article 1, Section 8 also starts with the phrase “The Congress shall have Power to”, which some people have interpreted as making patents and copyrights optional. Protecting Rights cannot be optional. The purpose of government is to secure peoples’ right. The reason the patent and copyright clause is placed in this part of the Constitution is to direct the Congress to pass laws to implement them and to eliminate the States’ patent and copyright laws. This is clear from the structure of the Constitution and its History and the fact that President Washington was upset with Congress for not passing a patent law sooner.[3]

People claim that other rights are mentioned in the original Constitution, however they are always confusing procedural guarantees with rights. For instance, some people suggest that the Writ of Habeas Corpus is a right. Even in the Constitution it is clearly stated that it is a privilege, which is also not quite right it is a procedural guarantee. The Writ of Habeas Corpus is recourse under the law to determine if a person is being unlawfully detained.

The United States Constitution is mainly concerned with the structure of a federal government and the procedures it operates under. It is not a guarantor of our individual rights, with the exception of the rights of inventors and authors.

Conclusion

Substantive law is based on our Natural Rights, which are derived using reason from the idea that we own ourselves and our life (which clearly includes the right to our own life). Procedural law is designed to ensure the government protects our Natural Rights. Procedural law generally cannot be derived from pure logical deduction and is often based in historical experiences. When procedural law is treated as primary (procedural justice) it leads to all sorts of nonsense. The United States Constitution is primarily about the structure and procedure of the federal government and is not the main legal protection of our rights.

The Solyndra scandal demonstrates the Federal Government’s complete contempt for the Patent Office and the Constitution. The bankruptcy of Solyndra means that the federal government will have to pay out $535 million in loan guarantees. This means a single, politically connected company is going to absorb over half the shortfall in the Patent Office funding over the last two decades. If that money had been spent on the Patent Office it would have benefited thousands of companies and creating millions of jobs. Instead, this $535 million resulted in the employment of about 500 employees over a couple of years.

The right of inventors to their inventions, patents, is guaranteed in Article 1, Section 8, Clause 8 of the Constitution. The only rights mentioned in the original Constitution are the rights of inventors and authors. Congress has stolen over $1 billion in user fees from the patent office in the last two decades. The Patent Office is the only self funded agency in the federal government. This theft represents a tax on innovation and jobs. It now takes 3 years on average to obtain a patent and in areas of more complex technology it is not unusual for it to take 5-10 years to obtain a patent. If it took that long to obtain title to your house or car or stock you would think you were living in a third world country. Justice delayed is Justice denied.

The federal government thought it was a lot more fun to play venture capitalist for a green energy company than fulfill its Constitutional duties. Nowhere in the Constitution is the Federal Government given the power to play venture capitalist and this company is in no way is related to our national defense. This is a stark case of how far our government has strayed from the Constitution. They are funding companies without legal authority to do so and stealing user fees from the Patent Office which is their Constitutional responsibility.

The only way to increase our real per capita income is to increase our level of technology. In the United States that means we have to invent. Without a patent most technology startup companies cannot obtain funding. Without funding they do not create the new technologies that create high quality jobs and increase our standard of living.

Some people are suggesting that Congress has the power to abolish patents and copyrights in the United States. The argument is that Article 1, Section 8, Clause 8 of the Constitution states “The Congress shall have Power To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writing and Discoveries” and whether they exercise this power is optional.

This interpretation relies on the idea that when Congress is granted a Power it is unlimited. The United States was founded on the idea that Government power is not unlimited like the Devine Right of Kings. The United States was founded on the idea that powers of government are limited and come with duties, while Rights of citizens are unlimited and do not come with duties. I know this will come as a shock to those people raised on the modern liberal interpretation, which wants unlimited powers for government and sees the Bill of Rights as a list of negative rights – see Barack Obama. Congress, under Article 1, Section 8 also has the power to set “an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States.” This is not optional on the part of Congress, with the power comes the duty to establish these rules.

The interpretation of the Constitution that suggests Congress has the option to establish systems to protect inventors’ and authors’ rights is totally inconsistent with the history of the Constitution. The purpose of the Constitution was to set out the powers of the federal government. Article 1, Section 8 lists the powers but also the responsibilities of Congress. For instance, even the power to declare war comes with the responsibility to do so when the U.S. is under attack from foreign powers.

How do we know that Congress has the duty to protect the “Rights” of inventors and authors? Because the Declaration of Independence say so:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men,

It is well known that the unalienable Rights of the Declaration of Independence are the Natural Rights of Locke – Life, Liberty, and Property. Many people believe that Jefferson changed property to the pursuit of happiness because he was worried it would be interpreted as endorsing slavery. When the Founders used the word “right” they meant natural rights. The purpose of government is to secure these rights. When the Constitution states that inventors and authors have “Rights” in their creations, they mean natural rights and they understood that the purpose of governments was to secure these rights. This means that Congress has a duty to secure the rights of inventors and authors under Article 1, Section 8, Clause 8. If the words patent and copyright are meant as rights in inventions and writing, then it is clear Congress does not have the option of eliminating them. It is also clear that patents and copyrights are not limited by the preamble. Natural rights are not utilitarian, but are endowed on men by their Creator.

In the ACLU v. Myriad case, the ACLU has alleged that the patents involved in the case cover genes found in nature. This statement is so patently (pun intended) false, that the ACLU either purposely deceived the court or is guilty of gross negligence about the facts plead in the case. As Gene points out in his post, Fired up: Challenging the Constitutionality of the Patent Act none of the claims in question cover genes found in nature. These claims are directed to screening, identifying, and isolating the BRCA1/2 genetic sequences. This is not a claim to the gene itself, but methods of screening, indentifying and isolating the genes, which are processes not found in nature. There are claims to an isolated gene, but genes are not isolated from human cells in nature. These claims are similar to claims on vitamin B12. More than 80 years ago, prior to the isolation and purification of vitamin B12, the only “treatment” for megaloblastic anemia was for patients to consume a pound of raw liver a day. Since isolated and purified vitamin B12 is not found in nature, a patent issued for isolated B12. The ACLU purposely deceived the court when they stated, “The patents cover the human genes themselves”, paragraphs 3-4, 55-67, & 102 of the complaint, while ignoring that isolated genes do not occur in nature. Continue reading →